Student personal loans
Being a student can be a costly experience, particularly for those living in cities with high living expenses, such as Sydney or Melbourne. Students who don't have the benefit of parents supporting them through their years of studying need sources of funding that are realistic in terms of repayments.
What are student loans?
Student loans are a type of personal loan designed to help students pay for courses, university tuition and fees, as well as living expenses. They are a common feature of higher education in many parts of the world.
For those starting out at university, growing sufficient savings to fund your studies may feel nearly impossible. Even with a part-time job, this is not likely to give students a serious nest egg to fund their courses. For many young people – and mature students as well – a student loan from either a public or private source of finance is the only way to afford their education.
Taking out a student loan can be seen as an investment in your financial security over a number of years, as you're aiming to fund a course or degree that can improve your job opportunities over your career and earn more than you might otherwise have done.
Who can use a student loan?
Much like with all personal loans, student loan eligibility in Australia is up to the discretion of the lender you’ve chosen. This means that if you aren’t an Australian Permanent Resident, you’ll need to carefully examine the eligibility criteria of said lender to see if they provide financing for non-permanent residents, like international students.
There are a range of personal loan lenders who provide finances for students, and one of the best ways to choose the most competitive product to fund your education is to utilise comparison tools, such as RateCity’s student loan comparison table.
What are the features of a student loan?
| Feature | About |
|---|---|
| Secured loan | This allows you to put down an asset, such as a car or equity in a home, as security on your personal loan. This usually results in a lower interest rate as you’re seen as a less risky borrower, however if you fail to make your repayments, this security can be repossessed by the lender. |
| Unsecured loan | Does not involve putting down an asset as security, and therefore usually comes with a higher interest rate. This type of personal loan usually comes with more flexibility though. |
| Tranche funding | Some lenders can release your funds in portions throughout the length of your course. |
| Repayment schedule | Lenders allow you to choose your student personal loan repayment schedules, such as fortnightly or monthly, allowing for flexibility in your budget planning. |
| Loan term | The length of your loan repayments, usually between two and five years. |
What student loans can I get from the Australian government?
Student loans are one way to bridge the gap between what Centrelink is able to provide through assistant programs. According to StudyAssist, there are a range of government loans and subsidies in place, including:
- HECS-HELP - a loan scheme to help eligible Commonwealth-supported students to pay their student contribution amounts through a loan or upfront discounts.
- FEE-HELP - a loan to help eligible fee paying students to pay their tuition fees.
- SA-HELP - a loan that assists eligible students to pay for all or part of their student services and amenities fees.
- OS-HELP - a loan to help eligible Commonwealth supported students pay their overseas study expenses.
- VET Student Loans - a loan program that helps eligible students enrolled in certain higher-level vocational education and training courses at approved course providers to pay their tuition fees.
Loans from the government can be attractive in terms of good repayment conditions, but not everyone is necessarily eligible for these, and even those receiving a government loan may need to consider taking out a student loan from a private provider.
How do I get approved for a student loan?
Approval for a student personal loan in Australia could depend on individual finances and the lender’s eligibility criteria. One of the best things you can do is to try and improve how reliable lenders perceive you as a borrower, as well as to research and compare your student personal loan options before applying.
- Examine your credit history – if you have a bad credit history, your chance of approval for a student loan will be negatively impacted. If you have no credit history or a short credit history, lenders will take this into consideration for student loans, as most students are too young to have developed an excellent credit history.
- Pay off your debt – If you have existing debt from a credit card or another personal loan, lenders will see this when they examine your personal finances. Try to pay off your debt, or at least consistently meet your monthly repayment amounts to help improve your credit score.
- Regular income – having a regular income source, such as a full-time job, will show lenders that you have stability in your finances. While having a full-time job can be near-impossible for many students, lenders can take this into consideration, and look favourably on those with casual or part-time work.
- Compare student loan options with RateCity comparison tools, such as student loan comparison tables, to ensure you’re getting the most competitive personal loan for your financial needs.
- Carefully examine the eligibility criteria of the lender, particularly if you are an international student, to make sure you’re applying for a student loan you could be approved for.
Alternatively, you can consult a finance broker and let them organise the loan on your behalf. Most finance brokers won’t charge for the service; instead, they’ll earn a commission from the lender.
What are the pros and cons of student loans?
For many students, a student loan is essential to be able to manage finances during the period of study. Often with lower than average interest rates and favourable repayments terms, they can provide financial security while at university.
Further, for young students with non-existent credit history, lenders won’t necessarily reject your application. Instead, they may offer you a higher interest rate than someone with a great credit score.
If you take out a student loan and are able to defer your payments, this might seem like it’s helping your immediate financial situation. However, that interest is likely to be charged on the loan right from the start, and after a number of years that can add a lot of money to what you will have to repay.
Pros
- Able to afford an education
- Lower than average interest rates
- More understanding eligibility criteria
Cons
- Risk of falling into debt
- Deferring payments will lead to higher interest
